An expensive mistake for one taxpayer

March 6, 2008 5:02:54 PM PST
Tax season is on the way and you may be figuring out how much you owe. But what if you heard Uncle Sam owed you thousands of dollars? Michael Finney says it might not always be a reason to celebrate.

The old adage goes if it seems too good to be true, maybe it is. That's what happened when a Bay Area consumer learned she was getting $17,000 dollars back from the IRS.

Brenda Rigsby of Richmond doesn't like figuring her own tax returns, so she hired a tax preparer two years ago, and boy did Brenda get a big surprise.

"She said my refund was $17,000 dollars and I asked her to recheck it because I had never received a refund for that amount of money," said Rigsby.

It was about three times more than she usually gets, but the tax preparer, Jackson Hewitt in Berkeley, said indeed Brenda was entitled to that big chunk of cash.

"Because I had refinanced my house twice and I had a lot of interest," said Rigsby. "I assumed she knew what she was talking about."

Sure enough, 10 days later the big check came from Uncle Sam.

"I paid my daughter's college tuition. I paid off all my bills," said Rigsby.

It was all well and good until two years later, when she got a bigger shock.

"I got a bill from the IRS saying that I owed them $14,000 dollars," said Rigsby.

The IRS said that tax refund was indeed way too high and this is why. The IRS return she filed mistakenly said the government withheld $22,000 dollars from Brenda's salary in 2005. It actually withheld only about $7,000 dollars. That means her $17,000 dollar refund should have been only about $4,000 dollars. Now Brenda has to pay all of the extra money back plus interest -- more than $16,000 dollars in all.

"That's a hard pill to swallow," said Rigsby.

But Brenda did have an insurance policy. It says Jackson Hewitt would pay her up to $5,000 dollars if it made a mistake on her returns, but when she filed a claim, the company would not pay, accusing her of fraud.

"I couldn't understand why they were accusing me of fraud when it was her mistake," said Rigsby. "They had even told me that she had made a mathematical error."

Jackson Hewitt reviewed the documents and still no payout. So she called 7 On Your Side.

"And when 7 On Your Side called them back, out of nowhere, I got a $5,000 dollar check in the mail," said Rigsby.

And after that, she received a check for $1,658 dollars to cover the interest

So what happened? Jackson Hewitt could not tell us how the mistake happened, but after an investigation, it did come through and pay off her insurance claim. The company said it is committed to quality customer care.

So who is responsible legally if your tax preparer makes a mistake? We asked IRS spokesperson Jesse Weller.

"Anything you put on your tax return you are responsible for as the taxpayer so it's very important for you to review what's on your tax return, ask questions about things you don't understand," said Weller.

"I did receive the money. I did spend the money. I know I have to pay it back, so I'll just have to pay it back," said Rigsby.

A big clue to a correct return is the bottom line. If your refund is much greater or much less than usual, ask your tax preparer for a detailed explanation.

To learn more about tax filing: http://www.irs.gov/advocate/index.html


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